How The Typical Processing Arrangement Works

There are two parts to the credit card rate, interchange and the merchant account markup. Interchange is the amount that gets paid to Visa and MasterCard. The processor markup goes to your processor to cover their costs and profit. There are hundreds of different interchange fees, and they are based on factors like the type of card being used, the type of merchant involved and how secure the transaction is considered to be. The credit card companies charge the processors these fees, and they are entirely passed along to the merchant. Depending on the nature of the transaction, the processor will then assign the transaction to one of three tiers - qualified, mid-qualified or non-qualified. Qualified transactions have the lowest rates. The processor usually quotes the merchant the low qualified rate, implying that this is what the merchant should expect.